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The company has yet to sign a marquee customer, but the latest deal will help BroadSoft sit out the telecom spending freeze and further its aspirations of enabling service providers to reclaim the ground they lost against enterprise PBXs.

Context

BroadSoft has so far raised $47 million in three funding rounds, and employees number 85. In its third round in January, BroadSoft raised $19.5 million. Tekelec joined existing investors Bessemer Venture Partners, Charles River Ventures, Columbia Capital and Crescendo Ventures in the round.

But it hasn't been all smooth sailing. In July last year, Unisphere pulled out of a planned acquisition of the company that was announced in October 2000. The companies said the decision was by mutual agreement and was mandated by market conditions. Unisphere has subsequently sold its packet voice business to parent company Siemens, and may have balked at adding more costs to its operations. The sale of the packet voice business is sure to have ended any partnerships that BroadSoft maintained with Unisphere, since Siemens and BroadSoft are in effect rivals.

Like Sylantro, BroadSoft believes there is an opportunity in providing the tools for service providers to reclaim the ground they lost to PBXs by providing low-cost Centrex services. PBXs replicate many of the Centrex services, such as call forwarding and caller ID, that were provided by local service providers in the past. The threat from PBXs for enterprise services has become even more acute now that access lines are in decline.

Products

The core of BroadSoft's platform is its application server -- which underpins services from hosted applications like voice portals and hosted PBXs, in addition to Centrex services -- but the device is coupled with a network server and media server. While BroadSoft can use partners for some of the elements in its platform by using protocols like SIP (session initiation protocol) or Megaco (media gateway control protocol), integrating the elements horizontally allows the company to layer service provider, enterprise and end-user services. The company has, however, worked on interoperability with a number of softswitch vendors, including Telica, which shares an investor in Tekelec. Individual users can customize their service using a Web interface, while service providers can handle call control and service management through a higher level Web interface.

BroadSoft supports open interfaces, but according to VP of marketing Scott Wharton, there are some advantages to some level of integration, like a single interface into authentication and billing software at the back end, as well as hooking into OSS infrastructure. In addition, the integration of a network server adds cost-based routing and regulatory requirements and high availability to the platform. Also, Wharton maintains that the relatively high density of media servers from companies such as Convedia in comparison to its Netra-based media server can lead them to cost up to 20 times as much for smaller deployments.

The platform has no TDM interfaces, implying that in the case of circuit-switched networks, carriers have to install a media gateway between its BroadWorks platform and a Class 5 switch or the PSTN. The platform supports interfaces for integrated access devices (typically SIP), line gateways and IP phones.

Strategy BroadSoft is hoping to exploit two points of weakness in the telecom world. Enterprise PBXs have gradually sapped much of the income incumbent carriers could pick up from enterprises for enhanced services. Carriers haven't been able to sell much in the way of Class 5 services beyond call waiting, call forwarding and caller ID. BroadSoft reckons that since incumbent carriers already have existing data customers, there's an opportunity to go after them for more IP-based services.

On the other hand, incumbent vendors such as Lucent and Nortel have lagged in the development of next-generation telephony equipment, and in some senses are constrained by their sales of circuit-switched Class 5 switches and PBXs in pursuing the market for the new softswitch-based architecture, according to Wharton. That may have been the case a year ago, but Nortel and Siemens have realized that they stand to lose out against more aggressive IP PBX vendors -- namely Cisco -- if they don't move quickly enough away from their legacy digital telephony installed base. That means putting R&D into next-generation media servers that don't rely on off-the-shelf CompactPCI cards and enterprise softswitches that support SIP. While BroadSoft has a lead in technology, Nortel is deeply entrenched at carriers like Sprint. BroadSoft's primary challenge is displacing the incumbents, not convincing carriers to install lower-cost Centrex gear.

the451 (www.the451.com) is an analyst firm that provides timely, detailed and independent analysis of news in technology, communications and media. To evaluate the service click here.

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